Warren Buffett, the CEO of Berkshire Hathaway, has made significant moves in the stock market. He sold a large portion of Apple shares and acquired a position in Domino’s Pizza. Buffett once called Apple the “best business” in the world.
However, he sold 100 million shares of Apple in the third quarter, reducing Berkshire’s stake by 25%. Apple remains Berkshire’s largest holding as of September 30. Buffett has now sold more than 615 million shares over the last four quarters.
In contrast, Berkshire Hathaway initiated a small position in Domino’s Pizza during the third quarter. The pizza company’s stock has surged 3,100% since its initial public offering (IPO) in July 2004. However, it has faced recent struggles, with shares falling 21% over the last three years.
Apple has built a strong presence in various consumer electronics markets, particularly in smartphones. Its products offer a seamless user experience across devices, attracting consumers willing to pay a premium. The average iPhone price was three times higher than that of the average Samsung smartphone in the third quarter.
Apple has also expanded its focus beyond hardware to services like App Store downloads, iCloud storage, and Apple Pay. It capitalizes on its installed base of over 2.2 billion active devices. In the fourth quarter of fiscal 2024, Apple reported a 6% revenue increase.
This was spurred by double-digit sales growth in services and mid-single-digit growth in Mac, iPad, and iPhone segments. Adjusted earnings rose 12% to $1.64 per diluted share.
Buffett’s strategic investment shifts
Despite this performance, some analysts argue the stock is overvalued. Wall Street expects a 10% annual earnings increase over the next three years. However, others, like Dan Ives at Wedbush, foresee Apple potentially becoming a $5 trillion company within 18 months.
Domino’s Pizza is the largest pizza company globally by sales and store count. It delivers 1 in every 3 pizzas in the U.S. Regular promotions and the relaunch of its loyalty program have helped Domino’s build a reputation for value. It has outperformed competitors like Papa John’s and Pizza Hut.
Domino’s has seen same-store sales growth in seven consecutive quarters despite challenging economic conditions. In the third quarter, the company’s revenue increased by 5% to $1 billion, although it fell short of Wall Street’s 7% growth expectation. Net income was flat at $4.19 per diluted share, exceeding analysts’ anticipated 13% decline.
Domino’s opened 72 new stores, bringing its total to over 21,000. CEO Russell Weiner expressed confidence in the company’s growth prospects. He projects a 3% or more annual same-store sales growth and an 8% annual income from operations growth through 2028.
Wall Street expects Domino’s earnings to increase at 8% annually over the next few years. Despite this potential, some investors may view the stock as expensive at its current valuation of 26.6 times earnings. They may wait for a more attractive entry point.
Warren Buffett’s recent stock maneuvers highlight his strategic focus on balancing the portfolio. He is balancing between established tech giants like Apple and consumer-focused companies like Domino’s Pizza. Both stocks offer distinct value propositions and growth potentials, catering to diverse investment strategies.
